May losses put at $100b

MAY was a month many investors would rather forget as heightened worries about Greece and other debt-laden European economies sent sharemarkets and the dollar plunging.

By InvestSMART · 1 Jun 2012

By InvestSMART ·
1 Jun 2012

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MAY was a month many investors would rather forget as heightened worries about Greece and other debt-laden European economies sent sharemarkets and the dollar plunging.

The benchmark ASX200 share index trimmed its losses during the day but still ended about 7.3 per cent lower for May - the worst monthly return since Europe's debt crisis erupted in May 2010.

The index closed down 17.9 points, or 0.44 per cent, at 4076.3 points after being about 1.5 per cent lower at one point. The broader All Ordinaries index fell 15 points, or 0.4 per cent, to 4133.7. The index fell about 7.5 per cent in May, or the equivalent of about $100 billion in market value.

The biggest losers for the month among the major stocks included Aquarius Platinum losing 45 per cent, Whitehaven losing 25 per cent, Toll Holdings losing 21 per cent, OneSteel losing 19 per cent and Fortescue Metals losing 18 per cent. Top gainers for May included Ramsey Health, up 7.7 per cent, News Corp up 6.8 per cent, AGL Energy up 4.7 per cent, Coca-Cola Amatil up 3.2 per cent and CSL up 2.7 per cent.

European shares, meanwhile, opened slightly higher after Wednesday's steep losses, with the FTSEurofirst 300 up 0.4 per cent at 979.65 points, on track for its biggest monthly loss since August when markets were similarly beset by fears over Europe's debt crisis.

The dollar edged back above the US97? level after earlier touching six-month lows on a global retreat to the greenback.

Yields on government debt maturing in two years or longer fell to record lows as a report showed home-building approvals dropped in April, boosting speculation the Reserve Bank will cut its cash rate again when it meets on Tuesday.

"Spain is becoming a huge problem," Derek Mumford, a director in Sydney at Rochford Capital, said. "A lot of money is going to be needed to bail them out. The Aussie [dollar] will inevitably be dragged down to a very important support area at US94.50? to US95?."

The 10-year Australian yield slid below 3 per cent for the first time, to as low as 2.856 per cent, the lowest in data compiled by Bloomberg since 1969. The rate on two-year notes fell to 2.108 per cent, also an all-time low.

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Frequently Asked Questions about this Article…

What happened to the ASX200 in May and why should investors care?

The ASX200 fell about 7.3% for May, marking its worst monthly return since May 2010 amid renewed worries about Greece and other European debt-laden economies. Sharp monthly moves can affect portfolio values, volatility and investor sentiment.

How much market value did Australian shares lose in May?

The wider market fell about 7.5% in May, equivalent to roughly $100 billion in market value lost across the market, according to the article.

Which ASX-listed companies were the biggest losers in May?

Among major stocks, the biggest monthly falls included Aquarius Platinum (down 45%), Whitehaven (down 25%), Toll Holdings (down 21%), OneSteel (down 19%) and Fortescue Metals (down 18%).

Which companies were the top gainers on the ASX in May?

Top gainers for May cited in the article were Ramsay Health (up 7.7%), News Corp (up 6.8%), AGL Energy (up 4.7%), Coca‑Cola Amatil (up 3.2%) and CSL (up 2.7%).

How did global factors like Europe's debt worries affect Australian markets?

Heightened concerns about Greece and other indebted European economies triggered a global sell-off that pushed Australian shares lower, weakened risk appetite, and drove investors toward safer assets such as government bonds and the US dollar.

What happened to the Australian dollar and government bond yields during the sell-off?

The Australian dollar briefly touched six-month lows before edging back above about US97¢. Yields on government debt fell to record lows: the 10‑year Australian yield slid below 3% to as low as 2.856%, and the two‑year rate fell to 2.108%, an all-time low in the data cited.

Was there any speculation about Reserve Bank interest rate moves after the market data?

Yes. A drop in home‑building approvals in April boosted speculation that the Reserve Bank might cut its cash rate again at its next meeting, which helped push bond yields lower.

What should everyday investors take away from this month of market volatility?

The article highlights that global debt concerns can quickly drive volatility across shares, currencies and bond markets. Investors may want to note which sectors and stocks are most affected (for example, several miners fell sharply while some healthcare and media names rose) and be aware that central‑bank expectations and safe‑haven flows can influence prices.